Banking stocks lead the weakness

Tue, 7 Dec 09:30 am

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Asian markets have opened today on a mixed note. While China and Japan are trading weak, stocks in Hong Kong are up currently. As for the Indian markets, these have opened marginally in the red. Banking and realty stocks are leading the losses. Metal stocks are however trading amidst gains.

The BSE-Sensex is trading lower by around 30 points (0.1%), while the NSE-Nifty is down about 5 points (0.1%). Mid and small cap stocks are also trading weak, with the BSE-Midcap and BSE-Smallcap indices down by 0.1% and 0.4% respectively. The rupee is trading at 44.82 to the US dollar.

Telecom stocks have opened on a mixed note. While gains are seen in Bharti Airtel and MTNL, selling pressure marks trading in Tata Comm and Reliance Comm. A new controversy has erupted in the sector, with a couple of existing players firing a salvo against their peers for unethical business practices. We are talking about GSM mobile service providers Bharti Airtel and Idea Cellular accusing CDMA plus GSM operators Reliance Comm and Tata Teleservices of overstating subscriber numbers. This follows a recent allegation from the Tata camp that GSM operators were hoarding spectrum. While this controversy over subscriber number over-statement isn't anything new for the Indian telecom sector, it is the first time that almost all the leading players have come out in the open with the blame game. It just goes to show the level of cut throat competition that these companies are facing against each other for the prized Indian telecom customers, which currently have a count of more than 600 m.

The RBI governor's diktat seems to have started working on the banking industry. This is suggested by reports that India's largest bank, SBI has raised its deposit rate by 1.5% across various maturities of deposits. This move will provide better returns to depositors who have generally shirked bank deposits in favour of other better yielding assets like government bonds, gold, and stocks. While deposit rates in India are still not as competitive as these other asset classes, it is heartening to know that a small beginning towards making them attractive has been made. All thanks to the RBI, which recently asked banks to raise deposit rates and reduce lending rates to raise the savings and investment rate in the economy! Anyways, SBI's rate hike will be effective today, and is likely to add to pressure on the bank's net interest margin going forward. This move is also expected to prompt other banks to raise their deposit rates.